Latest news with #mortgage
The Australian
3 hours ago
- Business
- The Australian
Smaller banks offering lowest home loan interest rates after RBA rate cuts: canstar
Making one simple change could save tens of thousands of dollars, and that's even before making extra repayments or throwing money into an offset account. The average owner-occupier variable home loan rate is now at 5.8 per cent, comparison group Canstar estimates. So if you're on that rate or above, and especially if you're in the early years of a 30-year mortgage, it might be time to shop around for a better deal. To give you an idea of what you could be paying, the lowest variable offering currently in the market is 5.34 per cent. For first home buyers it's even lower at 5.24 per cent. Who's offering the best rates? Smaller banks and non-bank lenders are offering the most competitive rates. Non-bank lender Pacific Mortgage Group is leading the pack with its 5.34 per cent variable loan but there are plenty of others sitting just slightly higher, per the table below. Again, keep in mind that Horizon's offering is only for first-home buyers. All up, eight lenders are currently offering rates of 5.39 per cent, including People's Choice, RACQ Bank and Australian Mutual, while a handful more have rates as low as 5.44 per cent. All up, 34 lenders now offer at least one variable rate under 5.5 per cent, according to Sally Tindall, head of research at Canstar. 'If your rate's above 5.8 per cent, alarm bells should be ringing. That's just the average, it's not even competitive,' she says. If you're keen to stick with the big four banks, CBA, Westpac and ANZ are currently offering variable rates of 5.59 per cent, while NAB is the outlier at 5.94 per cent. These are the advertised rates but there's often wriggle room for the bank to do a better deal if, for example, your loan-to-value ratio is particularly low. For those looking at fixed rates, there's a handful offering just under 5 per cent. But the cash rate is widely expected to fall further in the near term, meaning variable rates will continue to drop. Refinancing options Do-it-yourself refinancing, that's dealing with the bank yourself rather than through a broker, can be a bit of a pain and time consuming but it can also pay off. Your broker isn't always going to tell you the absolute lowest rates on the market, only the ones they can get for you. But if you've got a broker who can get you a competitive rate, it means they do all the legwork and you don't have to spend hours calling up each lender to get the best deal. Keep in mind, broker or not, switching lenders comes with fresh credit checks and invasive financial questions, as well as refinance fees that can range from $500 to $2000. There's also the risk that you refinance and the Reserve Bank cuts rates but your new lender doesn't pass the cuts on. We may not see this in the current cycle, especially since Treasurer Jim Chalmers was straight onto the banks in February ordering them to pass the RBA cut on, but it's a risk to be aware of. If you can't get a lender to give you a rate near the lowest in the market (5.34 per cent), getting it down from say, 6 to 5.5 per cent, will still mean a big saving. But there are traps to watch for, including the impact of stretching out your loan term back to 30 years. Crunching the numbers for The Australian, Canstar has come up with a couple of scenarios that illustrate the point. A borrower with a $600,000 home loan and 25 years left on their mortgage who refinances to 5.5 per cent and keeps their current loan term will potentially save almost $52,000 in interest. But if that same borrower extended the loan term back out from 25 to 30 years, their monthly repayments would drop by $459 but over the life of the loan they'd actually end up paying $55,000 more than if they'd done nothing at all. Canstar's scenario assumes there's two more RBA rate cuts (which we expect this year), bringing the cash rate to a neutral 3.35 per cent. It also assumes the banks pass on these cuts. No frills, digital only Other offerings in the market to look at are the no-frills, digital-only products like CBA's digi home loan and digital bank Up, which is backed by Bendigo Bank. CBA's digi home loan rate for owner-occupiers is at 5.59 per cent while its offering for investors is a competitive 5.69 per cent. Unloan, another digital-only offering backed by CBA is even lower, at 5.49 per cent. Like other lenders, CBA has seen a pick-up in customers looking to refinance since the RBA kicked off its rate-cutting cycle in February, according to its executive general manager for home buying, Dr Michael Baumann. 'It's a good trigger for customers to look at the interest rate they're paying and figure out whether they're on a good deal,' Baunmann says. The bank has seen a doubling of applications on the digital home loan product in the past year. And in a sign of an increasingly competitive market, CBA recently slashed its rates more than the RBA's 0.25 per cent May rate cut. Over the past six weeks the rate for owner occupiers has come down 31 basis points, while for investors it's down 43 basis points. With market watchers tipping two more RBA rate cuts in the next few months, if you get your lender down to a rate of 5.49 or less before the next cut you could be looking at a rate that starts with a 4 within a few months. Business The latest surge in Bitcoin, along with big players making investments in the sector, is retesting interest in the mysterious asset class. But is it for you? Business From July 1 the way the ATO enforces unpaid debts is changing. For some, it means their interest bill is poised to double.
Yahoo
4 hours ago
- Business
- Yahoo
How to buy a house with bad credit
You can get a mortgage with a credit score as low as 620, 580 or even 500, depending on the type of loan. While you might be eligible for a mortgage with a low credit score, you'll pay a higher interest rate for the loan. Some mortgage lenders offer free credit counseling to help you improve your score before applying for a loan. Want to buy a house but worried that your credit isn't good enough to make it happen? You're not alone. Twenty-four percent of Americans who don't currently own a home point to their credit not being good enough as why, according to Bankrate's 2025 Home Affordability Report. While your credit score is the first factor mortgage lenders consider when determining whether you're eligible for a loan, it's not the only piece of the puzzle. Read on to learn how to borrow the money you need to buy a house with bad credit. You can get a mortgage with a lower or bad credit score, but to do so, you'll need to prepare financially to ensure you get the best possible loan terms. Your preparations should include working to improve your credit score before applying, as this will increase your approval odds and put you in the best spot to secure a competitive interest rate. Here are some steps to take: Checking your credit report for errors can help identify any items that may be lowering your credit score. Several factors make up your credit score, including your payment history, amounts owed on current credit and how long you've had credit accounts. Your credit mix and new credit accounts also play a role in your score. If you see a mistake or outdated item related to any one of these factors, contact Equifax, Experian or TransUnion. Each credit bureau has a process for correcting errors and out-of-date information. When working toward buying a home with bad credit, try to pay down what you already owe. Lowering your debt load might not only boost your credit score but also make you eligible for a bigger mortgage, thanks to a better debt-to-income (DTI) ratio. Every mortgage lender is different, and some offer lower rates and fees than others. Research shows that getting multiple rate quotes can save you thousands over a 30-year mortgage. Check out different types of lenders, including banks and online lenders, to see where you get the best offer. Learn more: Best mortgage lenders for bad credit If you have bad credit, consider asking a family member or friend with better credit to co-sign your mortgage. This can help give your application a boost — but only if the co-signer is able and willing to take on the debt. (Note that co-signing is different from co-borrowing.) If you see ads promising 'guaranteed' approval for a mortgage regardless of credit, it's a red flag. Under federal rules, a lender must verify the ability of a borrower to repay a mortgage, so there can't be a 'guarantee' unless that happens. Even if you get that guaranteed approval, it usually comes with excessive or inflated costs. Credit report changes can take time to go through the system, so improved scores might not show up in time for a mortgage application. In this case, you can try getting a rapid rescore through your lender. In this process, your lender submits proof to a credit agency that an applicant has made recent changes or updates to their account that are not yet reflected on their credit report. You'll need to pay for this service, but the expense might be a worthwhile trade-off to get a better interest rate. Loan type Credit score minimum Conventional loan 620 or 660 depending on program FHA loan 580 (or 500 with a minimum 10 percent down payment) VA loan No official requirement, but typically 620 USDA loan No official requirement, but typically 640 Fannie Mae and Freddie Mac each back conventional loans with a lower minimum credit score of 620 and 660, respectively. Both of these loans require just 3 percent down and may offer either a fixed or variable interest rate. Conventional mortgages, however, may have stricter qualification criteria than other types of mortgages, such as FHA or VA loans. The Federal Housing Administration (FHA) insures FHA loans, which allow mortgage lenders to accept a credit score as low as 580 with a 3.5 percent down payment, or 500 with a 10 percent down payment. While FHA loans have more lenient qualifying criteria, they come with mortgage insurance premiums (upfront and annual) that you'll need to pay no matter your down payment size. If you're a military member, veteran or married to someone who has served in the armed forces, you could benefit from a VA loan backed by the U.S. Department of Veterans Affairs. You don't have to meet a specific credit score minimum to qualify, although many lenders do require a score of at least 620. No down payment is necessary with this loan, but you'll need to pay the VA funding fee. If you have a lower income and want to buy a home in a particular rural area, look into a USDA loan. While not a hard-and-fast rule, most USDA-approved lenders require a minimum credit score of just 640. Like VA loans, USDA loans come with no down payment requirement. Lenders rely on data from the three main credit reporting bureaus, Equifax, Experian and TransUnion. Typically, a lender looks at the middle credit score of the three when considering you for a mortgage. In addition to your scores, the lender will look at your credit report, including total debt and any issues like defaults or late payments. Mortgage lenders most often use the FICO credit scoring model to assess creditworthiness. Here's how those ratings work: Credit score range Rating Below 580 Poor 580-669 Fair 670-739 Good 740-799 Very good 800 or above Excellent Bankrate insight The average credit score of outstanding mortgages in the U.S. as of the fourth quarter of 2024 was 741, according to the Federal Housing Finance Agency. A poor credit score will primarily cost you in the way of a higher interest rate. Here's an example assuming a 30-year conventional loan for $400,000: FICO score APR* Monthly payment Total interest paid 760-850 7.072% $2,681 $565,009 700-759 7.314% $2,746 $588,593 680-699 7.428% $2,777 $599,779 660-679 7.482% $2,792 $605,095 640-659 7.58% $2,819 $614,769 620-639 7.711% $2,855 $627,755 Will you pay more for mortgage insurance with bad credit? It depends on the type of mortgage. Private mortgage insurers — which offer mortgage insurance for conventional loans, known as PMI — base their rates on credit score, among other factors. Generally, if you have a lower credit score, you'll pay more for PMI. On the other hand, if you're getting an FHA loan, your credit score won't impact how much mortgage insurance you pay — those rates depend on the loan term, loan amount and the size of your down payment. Are mortgage rates higher with bad credit? Yes. Generally, if you don't have good credit, that's a sign you're a riskier borrower. To compensate for taking on that risk, your lender will charge you a higher interest rate. Sign in to access your portfolio
Yahoo
13 hours ago
- Business
- Yahoo
Lenders follow Bank of England and hold mortgage rates
Most lenders opted to maintain their mortgage deals as the Bank of England (BoE) decided to hold interest rates on Thursday, but experts expect more sub-4% offers in the coming weeks. The average rate for a two-year fixed mortgage stands at 4.89%, while five-year fixed deals average 5.19%, according to data from Uswitch. The Bank of England has kept interest rates at 4.25% amid inflation fears, delivering a blow to homeowners who were expecting a relief in their mortgage. However, industry experts are not giving up hope yet. Tom Davies, group financial services managing director at LRG, said: "For prospective buyers, the key question shouldn't be, 'Will the rate fall again soon?' but, 'Can I afford to buy now, and is the right property available?'. Today that answer is more often yes than no. Buyers who wait for the perfect moment may find it never arrives — or that it passes them by. "What matters now is a functioning, competitive mortgage market with realistic pricing and good choice. That's a strong foundation: a good environment for anyone looking to move or invest." Matt Thompson, head of sales at estate agency Chestertons, said: 'Some buyers paused their property search in the hope for another interest rate cut and a more varied selection of mortgage products but higher-than-expected inflation has diminished those odds for the time being. "We have recently seen some lenders increase the cost of their fixed-rate deals but there are still sub-4% options available which will encourage some house hunters to resume their search over the coming weeks.' Read more: UK house price growth halves after stamp duty break end The primary inflation measure, the Consumer Price Index (CPI), stood at 3.4% in the 12 months to May, a slowdown from the previous month. However, price increases are still well above the BoE's 2% target. This week among the major lenders only Halifax reduced rates, as most banks decided not to touch their mortgage deals. HSBC (HSBA.L) has a 4.01% rate for a five-year deal, unchanged from the previous week. For those with a Premier Standard account with the lender, this rate is 3.98%. Looking at the two-year options, the lowest rate is 3.99% with a £999 fee, also unchanged from the previous week. Both cases assume a 60% loan-to-value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit. HSBC offers 95% LTV deals, meaning you only need to save for a 5% deposit. However, the rates are much higher, with a two-year fix at 5.05% or 4.89% for a five-year fix. This is because their financial situation and deposit size determine the rate someone can get. The larger the deposit, the lower the LTV, allowing buyers to access better deals because lenders consider them less risky. NatWest's (NWG.L) five-year deal is 3.95% with a £1,495 fee, untouched from the previous week. The cheapest two-year fix deal is 3.2%, again the same as last week. You'll need at least a 40% deposit to qualify for the rates in both cases. At Santander (BNC.L), a five-year fix is 4.08%% for first-time buyers, the same as before. It has a £999 fee, assuming a 40% deposit. Read more: Number of million-pound homes for sale in Britain doubles since 2019 For a two-year deal, customers can also secure a 4.01% offer, with the same £999 fee, again unchanged. However, the lender has cut a raft of deals for first-time buyers: 90% LTV two-year fixed rate with a £0 fee and £250 cashback. Rate reduced by 0.15% to 4.73%. 95% LTV two-year fixed rate with a £0 fee and £250 cashback. Rate reduced by 0.14% to 5.00%. 90% LTV five-year fixed rate with a £999 fee and £250 cashback. Rate reduced by 0.10% to 4.47%. 95% LTV five-year fixed rate with a £0 fee and £250 cashback. Rate reduced by 0.22% to 4.85%. The new pricing is available to all customers, whether they are applying via a broker or directly, under Santander's "no dual pricing" pledge. Barclays (BARC.L) was the first among major lenders to bring back under-4% deals and currently has a five-year fix at 3.99%, unchanged from last week. For "premier" clients, this rate drops to 3.98%. The lowest for two-year mortgage deals is 3.97%, also unchanged. Barclays last month launched a mortgage proposition to help new and existing customers access larger loans when purchasing a home. The initiative, known as Mortgage Boost, enables family members or friends to effectively "boost" the amount that can be borrowed toward a property without needing to lend or gift money directly or provide a larger deposit. Under the scheme, a borrower's eligibility for a mortgage can increase significantly by including a family member or friend on the application. For example, an individual with a £37,500 annual income and a £30,000 deposit might traditionally be able to borrow up to £168,375, enabling them to purchase a home priced at around £198,375. However, with Mortgage Boost, the total borrowing potential can rise substantially if a second person, such as a parent, joins the application. In this case, if the second applicant also earns £37,500 a year, the combined income could push the borrowing limit to £270,000, enabling the buyer to afford a home worth up to £300,000. Nationwide's (NBS.L) lowest mortgage rate for first-time buyers is 4.24% for a five-year fix, which is the same as before. First-time buyers are currently looking at 4.04% for a two-year fix, again no changes from the previous week. Read more: Average UK house asking price drops by more than £1,000 The lender has adjust its mortgage affordability calculation by reducing stress rates by 0.75 and 1.25 percentage points, helping applicants borrow more, whether buying a first home, moving, or remortgaging. Applicants can borrow, on average, £28,000 more; however, in some remortgage cases, customers could borrow up to £42,600 more. Nationwide also reduced its standard stress rate and the rate applied to eligible first-time buyers and home movers fixing their deal for at least five years. Halifax, the UK's biggest mortgage lender, offers a five-year rate of 4.03% (also 60% LTV), untouched from last week. The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate deal at 3.97%, with a £999 fee for first-time buyers, lower than the previous 4%. It also offers a 10-year deal with a mortgage rate of 4.78%. Read more: How to choose where to live as you get older Halifax has enhanced its five-year fixed mortgage products by increasing borrowing capacity. This improvement allows borrowers to access up to £38,000 more, enabling them to secure larger mortgages based on individual incomes. Rachel Springall, finance expert at Moneyfacts, said: "The flourishing choice of low-deposit mortgages will no doubt be welcomed by borrowers looking to remortgage or are a first-time buyer. "The government has been clear that it wants lenders to do more to boost UK growth, and so a rise in product availability for aspiring homeowners is a healthy step in the right direction." NatWest's currently offers some of the lowest rates, with a five-year fix coming in at 3.95% and a two-year deal at 3.92%. However both require a hefty 40% deposit. The average UK house price is £297,781, so a 40% deposit equals about £120,000. A growing number of homeowners in the UK are opting for 35-year or longer mortgage terms, with a significant rise in older borrowers stretching their repayment periods well into their 70s. Read more: UK inflation slows to 3.4% in May as transport costs ease Lender April Mortgages offers buyers the chance to borrow up to six times their income on loans fixed for five to 15 years, from a deposit of 5%. Both those buying alone and those buying with others can apply for the mortgage. As part of the independent Dutch asset manager DMFCO, the company offers interest rates starting at 5.20% and an application fee of £195. Skipton Building Society has also said it would allow first-time buyers to borrow up to 5.5 times their income to help more borrowers get on the housing ladder. Leeds Building Society is increasing the maximum amount that first-time buyers can potentially borrow as a multiple of their earnings with the launch of a new mortgage range. Aspiring homeowners with a minimum household income of £40,000 may now be able to borrow up to 5.5 times their earnings. Mortgage holders and borrowers have faced record-high repayments in recent years, as the Bank of England's base rate has been passed on by banks and building societies. According to UK Finance, 1.3 million fixed mortgage deals are set to end in 2025. Many homeowners will hope the Bank of England acts quickly to cut rates more aggressively. At the same time, savers will likely root for rates to remain at or near their current levels. Read more: The pros and cons of getting a mortgage into your 70s How school fees can affect your mortgage borrowing Pros and cons of lifetime ISAs
Yahoo
13 hours ago
- Business
- Yahoo
Annaly Stock Gains 8% in 6 Months: Is It Worth Holding for Now?
Over the past six months, Annaly Capital Management NLY shares have gained 8% compared with the industry's rise of 1.7%. Price Performance Image Source: Zacks Investment Research NLY has also outperformed its peers AGNC Investment AGNC and Arbor Realty Trust ABR over the same time frame. AGNC Investment has grown 5.7%, while Arbor Realty has fallen 20.9%. Annaly is a mortgage real estate investment trust that primarily owns, manages and finances a portfolio of real estate-related investment securities. The company's diversified approach to capital allocation has been crucial in its ability to navigate market fluctuations and maintain a competitive edge. Let us delve deeper and analyze other factors to find out the NLY stock's investment worthiness. The Federal Reserve has lowered the interest rates by 100 basis points in 2024 and has kept rates steady since then. As such, mortgage rates are witnessing a slight decline. Per a Freddie Mac report, the average rate on a 30-year fixed-rate mortgage was 6.84% as of June 12, 2025, down from 6.95% in the same week a year ago. Housing affordability challenges are expected to decline with lower mortgage rates. With rates trending lower and balanced supply/affordability playing out in the mortgage market, loan demand is witnessing an increase. With improving purchase originations and refinancing activities, NLY will likely witness book value improvement in the coming period as spreads in the Agency market tighten, driving asset prices. This should also boost net interest spread, improving the portfolio's overall yield. This is expected to support Annaly's financials in the upcoming period. Annaly has a record of paying monthly dividends, currently yielding a staggering 14.7% compared with the industry's 11.7%. It currently sits at a payout ratio of 101%. The company recently hiked its dividend for the first time in the past five years. On March 13, 2025, Annaly announced a cash dividend of 70 cents per share for the first quarter of 2025, marking a 7.7% hike from the prior payout. This move reflects confidence in NLY's cash flow and growth prospects. Annaly peer AGNC Investment and Arbor Realty Trust also pay out quarterly dividends. AGNC Investment has a dividend yield of 15.6%, whereas Arbor Realty Trust has a dividend yield of 11.7%. Coming back to Annaly, it is focused on improving its liquidity and reducing leverage to support capital distribution activities. Till the end of the first quarter of 2025, the company had $7.5 billion of total assets available for financing, including cash and unencumbered Agency MBS of $4.7 billion, which can readily provide liquidity in times of adverse market conditions. This provides a substantial competitive edge in today's market. On Dec. 31, 2024, the company's board of directors authorized a common share repurchase program, which will expire on Dec. 31, 2029. Under the program, the company may repurchase up to $1.5 billion of its outstanding shares of common stock. Though the company has not repurchased shares under this plan since it was announced, its solid liquidity position will support its capital distribution in the future. One of Annaly's main advantages is its well-diversified capital allocation approach. The company's investment portfolio includes residential credit, mortgage servicing rights (MSR), and agency mortgage-backed securities (MBS). This comprehensive strategy aims to lower volatility and sensitivity to interest rate changes while simultaneously generating appealing risk-adjusted returns. As of March 31, 2025, its investment portfolio aggregated $84.9 billion. Annaly's diversified investment strategy will likely be a key contributor to long-term growth and stability. By diversifying its investments across the mortgage market, the company is better positioned to capitalize on opportunities as they occur in multiple areas while limiting the risks associated with overexposure to any particular location. In sync with this, in 2022, NLY sold its Middle Market Lending portfolio and exited its commercial real estate business. Through these, the company was able to enhance capabilities across its core housing finance strategy and allocate capital to residential credit businesses, the MSR platform and Agency MBS. Annaly is also focusing on improving its capabilities by acquiring newly originated MSRs from its partner network, which will continue to provide a strong advantage in expanding its MSR business. The inclusion of MSRs in the portfolio is also notable because these assets tend to increase in value as interest rates rise, offsetting reductions in the value of agency MBS. This hedging impact may produce more consistent returns over time and enable Annaly to perform well in a scenario of interest rate change. From a valuation standpoint, NLY appears expensive relative to the industry. The company is currently trading at a premium with a forward 12-month price-to-tangible book (P/TB) TTM multiple of 0.98X, higher than the industry average of 0.96X. Price-to-Tangible Book TTM Image Source: Zacks Investment Research Annaly peer AGNC Investment and Arbor Realty Trust forward 12-month price-to-tangible book of 0.88X and 1.08X, respectively. Though the macro environment remains uncertain with elevated volatility, which may impact NLY's performance adversely, its strong liquidity position allows the company to maintain its dividend policy and take advantage of market difficulties to acquire assets at attractive valuations. Also, Annaly's diversified investment strategy can be a key contributor to long-term growth and stability, supporting its financials. With analysts revising earnings estimates upward over the past 60 days, sentiment around the stock remains constructive. Estimates Revision Trend Image Source: Zacks Investment Research As such, existing shareholders may consider holding on to NLY for its income-generating potential and long-term stability. However, new investors may benefit from waiting for a more attractive entry point, given the stock's current premium valuation. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AGNC Investment Corp. (AGNC) : Free Stock Analysis Report Arbor Realty Trust (ABR) : Free Stock Analysis Report Annaly Capital Management Inc (NLY) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Sign in to access your portfolio
Yahoo
13 hours ago
- Business
- Yahoo
How much is a down payment on a house?
You don't need to put 20 percent down to get a mortgage, and some mortgages don't even require a down payment. You can get a conventional mortgage with 3 percent down, but with anything less than 20 percent, you'll have to pay mortgage insurance. Making a larger down payment can get you a lower interest rate. Most — but not all — mortgage loans require a down payment, a percentage of the home value you pay upfront. How much you should put toward a down payment depends on the type of loan you're applying for and your financial situation. You might have heard you're required to put down 20 percent on a home, but in truth, you don't have to pay that much upfront. Your down payment size will depend on the minimum amount required for the loan type you're getting as well as how much you have saved for the purchase that you can comfortably part with. For example, if you plan to put down 10 percent on a $400,000 conventional loan, your down payment would equal $40,000. A 3 percent down payment — the minimum requirement for a conventional loan — would come to $12,000. The median down payment for all buyers as of 2025 was 15 percent, according to the National Association of Realtors. Bankrate insight Among Bankrate users, 42 percent, or nearly 260,000 users, plan to make a down payment of less than 20 percent, according to Bankrate's 2024 Annual Data report. Learn more: What's the average down payment on a house? Loan type Minimum down payment Conventional conforming loan 3 percent Jumbo loan 10 percent FHA loan 3.5 percent VA loan None USDA loan None Second home or investment property 10-25 percent The down payment requirements for a conventional loan on a primary residence vary depending on the lender, the borrower and the property type. For example, first-time homebuyers and buyers with low to moderate incomes could qualify for a fixed-rate conventional loan with a 3 percent down payment. However, you may or may not qualify to make your lender's lowest offered down payment. The amount you must put down will depend on your: Credit score Debt-to-income ratio (DTI) Savings and other assets House of choice Whatever the minimum required down payment on your conventional loan, keep in mind that if you put down less than 20 percent, you'll have to pay for private mortgage insurance (PMI). However, once you reach 20 percent equity in your home, you can request that your lender remove PMI from your bill. Jumbo loans are a specific type of conventional mortgage for high-priced properties. In 2025, homes that cost more than $806,500 in most markets will need a jumbo loan, though in high-cost areas, the limit may be as high as $1,209,750. Because of their size, jumbo loans typically require 10 percent down or more. FHA loans require a minimum down payment of 3.5 percent with a credit score of at least 580. If you have a credit score between 500 and 579, you'll need a 10 percent down payment. No matter how large your down payment on an FHA loan, you'll be required to pay mortgage insurance premiums (MIPs). There are two types of MIP: an upfront MIP paid at closing that's 1.75 percent of the loan amount, and an annual MIP that's added to your monthly mortgage payment. The annual MIP is based on the size of your down payment, your loan amount and your loan term, but it ranges from 0.15 to 0.75 percent of your total loan amount. If you put down 10 percent or more, and you took out your FHA mortgage after June 3, 2013, this annual MIP can be removed after 11 years. Otherwise, you'll pay this expense for the life of the loan. The VA and USDA both back zero-down payment loans for qualified homebuyers. VA loans are available to qualifying members of the armed forces, veterans and their surviving spouses. USDA loans, on the other hand, are available to borrowers purchasing homes in designated rural areas. The USDA has maps on its website that show eligible areas. Neither loan program requires mortgage insurance. With VA loans, you'll pay a one-time funding fee, which ranges from 1.25 percent to 3.3 percent depending on how many VA loans you've had, your loan type and your down payment amount. USDA loans have an upfront guarantee fee of 3.5 percent of the loan amount and an annual fee of 0.5 percent of the average annual loan balance. Your lender will be charged this fee and may pass the cost on to you. If you're buying a second home or an investment property with a conventional loan, the down payment requirement is usually higher than for a primary residence. Second homes typically start at 10 percent, and investment properties can require as much as 15 to 25 percent, depending on your creditworthiness and financial situation. Beyond the requirements, how much you should put down on a house is a personal decision. Consider: Your financial goals: Is your goal to build home equity, or would you prefer to invest that money elsewhere, such as a retirement fund? How long you plan to stay in the house: Is this a starter home, or do you plan on being there long term? If you plan on selling in five to 10 years, you might not be as interested in putting a lot of money down. Your emergency savings: Don't deplete your emergency fund just to make a larger down payment on a house. You'll need the cushion for unexpected expenses. Home needs: If you need to invest in a larger home – for example, if you need home office space or a guest room — you may be stretching your budget and need to put less money down relative to your loan size. If you're downsizing, on the other hand, a big down payment may be easier to manage. Closing costs: Closing costs are a bundle of fees paid when you finalize your mortgage. They can include attorney fees and a loan origination fee, and they usually cost 2 to 5 percent of your mortgage's principal amount. If your closing costs are on the higher end of that range, they may eat into your down payment savings. Costs to upgrade and repair the home: When you move, you'll likely need to pay for repairs or home improvements and buy new furniture or appliances. Your ability to save for a down payment is a good sign you're ready for the financial commitment of homeownership. Here are some clear benefits to waiting until you can make a bigger down payment: Lower mortgage rate: The less money you borrow as a percentage of the home's value, the less risk your loan poses to the mortgage lender. As a result, larger down payments tend to correlate with lower interest rates. More equity: The greater the percentage of your home you own outright, the more equity you have. That can be handy if you're looking to finance a renovation project in the short term. You can tap your home equity through a cash-out refinance, home equity loan or home equity line of credit (HELOC). Lower monthly payments: Because you're borrowing less money and you likely have a lower interest rate, you can expect a lower monthly mortgage payment. Cheaper closing costs: The fees you pay to your lender at closing are usually calculated as a percentage of your loan's total value, so if you borrow less, your closing costs will be lower, too. More competitive offer: If you're in a seller's market and competing with several other buyers, a larger down payment can make your offer more competitive. Being able to put up more cash might give the seller confidence that your loan will close. Lower chance of becoming underwater on your mortgage: If you finance too much of your home, and it ends up losing value, you could end up owing more money than your home is worth. Even if you can afford it, making a big down payment on a house isn't always the best decision. Here are some reasons why you may want to put less money down: It gets you in the door: If a down payment is your main obstacle to homeownership, making a lower one could be smart. More money for repairs or renovations: If you're buying a home that needs some investment, and you could theoretically pay for the repairs in cash, you may choose to make a lower down payment. Buying a more expensive home: If you take advantage of a lower down payment mortgage, you could buy a bigger home with the same money you would use to put 20 percent down on a cheaper home. Not draining your savings: By putting less down, you're potentially keeping money in the bank which you can use elsewhere. If you put that money into your house, you might get it back — and then some — when you sell or refinance. Investing it elsewhere: While homes are seen as secure investments, investors may prefer to put their money into the stock market where they could see a higher return. The lower your credit score, the more you may be required to pay upfront toward your home. For example, FHA loan borrowers may have credit scores as low as 500. However, if your score is 579 or below, you'll need to make a 10 percent down payment. If you have a score of 580 or higher, you can qualify to put down only 3.5 percent. With other types of mortgages, a lower credit score may not increase your required down payment, but it is likely to increase your overall costs. If you qualify for a mortgage, you'll typically receive a higher mortgage rate than a borrower with a lower credit score — and that raises the total cost of your mortgage. Because down payments are expressed as a percentage of the home's sales price, you can multiply the sales price by your target percentage to determine how much you'll need to put down. Here are some examples of how much the down payment on a house would be at different price points: Median home price* 3% down 9% down 18% down 20% down Midwest: $313,300 $9,399 $28,197 $56,394 $62,660 South: $365,300 $10,959 $32,877 $65,754 $73,060 Northeast: $487,400 $14,622 $43,866 $87,732 $97,480 West: $628,500 $18,855 $56,565 $113,130 $125,700 You can use Bankrate's mortgage down payment calculator to get a sense of how different down payment amounts impact your monthly mortgage payment, and the interest you can save by putting more money down. How can I find down payment assistance? Down payment assistance programs help eligible first-time homebuyers — and sometimes repeat buyers — with low to moderate incomes. Assistance can come from a government agency, a nonprofit or even your mortgage lender. It might include a forgivable or deferred loan, a grant or a matched savings program. Why do mortgage lenders require a down payment? Your down payment offsets the lender's risk. The more money you put down, the less the lender stands to lose if you default on payments, especially early in the loan term. Down payments on government-backed loans tend to be lower because the loan is at least partially guaranteed by a federal agency. When do I make my down payment? Down payments are typically made in two steps. First, you'll deposit a portion of your down payment — typically about 1 percent of the home price — as earnest money shortly after the seller accepts your offer on the home. You'll make the rest of your down payment at closing, along with paying your closing costs. This total amount is referred to as your cash to close. Can you buy a house without a down payment? Yes, mortgages backed by the VA and USDA are available without a down payment. Some commercial lenders or local credit unions may also offer no-down-payment mortgages. What other costs should I anticipate when buying a house? In addition to the down payment, you'll also need to pay closing costs, which usually total between 2 and 5 percent of your loan amount. Your lender might also require you to prove that you have reserves. This means you have enough money in the bank to cover a couple of months' worth of mortgage payments.
